Question

I'm looking for help with CapSim in Practice Simulation. How do I advance to the second round? What makes the time move forward?

Answer 1

TQM

When TQM Starts, you want to spend $1500 on the first round, then $1500 on the second round, and then finally $1000 on the third round.

This expenditure would be for every single aspect in TQM

R&D

Change MTBF for all our products to the maximum amount we can.

• Traditional to 19000
• Low End to 17000
• High End to 25000
• Performance to 27000
• Size to 21000

Modify each product according to the spreadsheet on each segment. You want to increase performance and reduce size as much as you can without the revision date reaching July. (26th of June is the best date to release products)

THE ONLY PRODUCT THAT DOES NOT MOVE, IT’S THE PRODUCT IN LOW END SEGMENT. LEAVE THIS PRODUCT AT ITS ORIGINAL SPECS

MARKETING

PRICE

• For traditional you want to start your pricing as close as your competition, undercut if possible.
• For low end, you have to have the lowest price you can afford without going below 40% in your contribution margin. And without sacrificing demand.
• For high end, performance and size segments, place your price the highest possible.

Recommendation for round 1

• Traditional at $29.5
• Low End at $21
• High End at $39.50
• Performance and Size at $34.50

PROMO BUDGET & SALES BUDGET

• Do not ever expend more than $2000 on promotion in any product in any give year. (diminish returns start at $2000)
• For the first year you want to spend $2000 in Traditional and Low End.
• For High End, Performance and Size; spend between $1000 and $1500
• Do not ever expend more than $2000 on promotion in any product in any given year. (diminish returns start at $2000)
• For the first year you want to spend $1500 in Traditional and Low End.
• For high End, Performance and Size; Spend around $1000 - $1500

FORECASTING

1. From the Market Share page in the Capstone Courier, take your last year’s market share and multiple it by the next year demand of each segment.
2. To calculate Next Year Demand, you take current demand and multiple it by the growth rate
3. Multiple your Market Share by Next Year’s Demand

Check the Useful Formulas post for some guidance.

PRODUCTION

PRODUCTION SCHEDULE

((Units Sales Forecasted) * (1.2) – Inventory on Hand))

We want to have cushion of inventory in case we sell more units than we forecasted.

AUTOMATION RATING

• Traditional, increase its automation by 2 points each round until you reach 10
• Low End, you want to reach 10 as soon as possible (first round you can move to 8 or 9, and make sure you have 10 by the 2nd round)
• High End, increase by 0.5 or 1 point each round, you do not want to go over 6.
• Performance, increase by 1 or 1.5 each round, until you reach 7
• Size, increase by 0.5 or 1 point each round, until you reach 7

WORKFORCE COMPLEMENT

Always at 100%

BUY/SELL CAPACITY

• You want to keep 2nd Shift Production % between 20% and 50%
• If you have less than 20%; you have to sell capacity
• If you more than 50% you have to buy capacity

After you make you decisions on production, check how much capital investment you have;

• If you have capital investment leftover, try to spend it in Automation or Capacity
• If you are spending more than you should, try to sell capacity or not invest as much.
• I highly recommend that you sell some capacity on the first round so you can finance Automation, sell on the traditional, high end, performance and size products.

HUMAN RESOURCES

You want to spend as much as possible in human capital, therefore you want to invest the maximum on recruiting and the maximum of training hours.

• Recruiting Spend; $5000
• Training Hours; 80 Hours

FINANCE

You want to have at least $10,000 in December Cash Position just to make sure you do not enter an Emergency Loan

We will source money until we reach this $10000 Cash position in the first year in the following order:

1. Get as much “Issue Stock” as possible
2. Get as much “Issue Long Term Debt”
3. Get whatever you need left from “Borrow”

• Retire stock it’s for when you have a good cash position and you have some money left over to purchase stock back from the market
• Dividends per share it’s for when you have cash leftover in capital investment to give to your shareholder.
• Retire Long Term Debt it’s for when you want to pay your debt early (This usually decreases your interests expense)